Tips to help keep the CRA off your back this tax-filing season

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The Canada Revenue Agency has already acquired greater than 2.5 million 2023 private tax returns as of March 4. Of these, over 95 per cent had been electronically filed, with solely 5 per cent of Canadians mailing of their returns.

Roughly 80 per cent of the returns processed up to now confirmed both no tax owing or a refund due, with the typical expected refund coming in at $2,279.

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When all is alleged and performed, based mostly on final yr’s tax return processing statistics, the CRA is predicted to obtain greater than 30 million private tax returns for 2023, which means that over 90 per cent of us have but to file.

That’s not stunning since most Canadians (current firm excluded, in fact) don’t benefit from the strategy of submitting their taxes. Certainly, 62 per cent expertise a minimum of a bit nervousness or stress in anticipation of submitting their taxes, in keeping with a brand new survey by TurboTax Canada, with 18 per cent preferring to go to the dentist as a substitute of doing their taxes. That nervousness stage rises to 85 per cent for youthful Canadians (aged 18 to 27), who might not have had a lot follow with this annual spring ceremony.

However concern not, intrepid tax filers, as I’ll be periodically sharing some useful tax tricks to information you thru the submitting season main as much as the April 30 basic deadline, a few of which come immediately from readers and shoppers. Let’s get began.

Reporting RRSP contributions

For those who made a registered retirement savings plan (RRSP) contribution in 2023 or within the first 60 days of 2024 (Jan. 1 to Feb. 29), you need to report that contribution in your 2023 tax return even should you don’t wish to deduct all of it towards your 2023 earnings. That is performed on Schedule 7 of the return, the place you enter your contributions in Half A of the shape, and then you definately select the quantity you want to declare (if any) in Half C, line 18.

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After doing so, Half D will calculate the unused portion of your RRSP contributions out there to hold ahead to any future yr. It’s possible you’ll select to delay claiming some (or all) of your RRSP contributions should you anticipate to be in the next tax bracket sooner or later when the RRSP deduction could also be price extra.

I deliver this up due to a state of affairs we just lately encountered the place a shopper’s tax preparer uncared for to report 2020 RRSP contributions on the taxpayer’s 2020 return as they determined to not declare them in 2020. This led to the taxpayer mistakenly making the identical RRSP contribution once more in 2021 with out having any new contribution room.

As soon as the CRA figured this out by the digital matching program, the taxpayer was hit with an RRSP overcontribution penalty tax equal to 1 per cent monthly for the surplus contributions (above the $2,000 overage permitted).

Pooling or deferring donations

Among the many multitude of non-public tax credit, from the fundamental private quantity (which everybody will get) to among the extra obscure ones (such because the volunteer firefighter quantity), solely the donation credit score is probably price greater than the usual 15 per cent federal credit score fee, which results in a possible planning alternative.

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For those who made a charitable donation in 2023, you get a federal credit score of 15 per cent for the primary $200 of annual charitable donations, however the federal credit score fee jumps to 29 per cent for cumulative donations above $200 (or 33 per cent when you have earnings topic to the highest federal fee of 33 per cent, which is earnings of greater than $235,675 in 2023).

Parallel provincial credit work equally, offering most Canadians with a minimal mixed federal/provincial tax credit score price a minimum of 40 per cent for donations above $200 yearly.

Due to the decrease threshold on donations beneath $200, in case your donations had been beneath that stage final yr, you would possibly take into account pooling donations along with your partner or associate (if relevant) and placing them on the identical return if collectively they’ll exceed the $200 restrict.

Alternatively, donations might be carried ahead for as much as 5 tax years, so you could want to postpone claiming small quantities of donations till the cumulative quantity is greater than $200 in a future yr.

Medical bills

The non-refundable medical expense tax credit score (METC) might be claimed for medical bills that weren’t coated by your provincial, group or non-public medical health insurance plan. In your 2023 return, the METC is offered offered your loved ones’s whole medical bills exceed a minimal threshold equal to the lesser of three per cent of your internet earnings or $2,635.

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You may as well declare a provincial/territorial credit score, with the minimal earnings threshold various by jurisdiction. Qualifying bills embody these you paid for your self, your partner or associate, and your youngsters underneath the age of 18.

One often-overlooked medical expense that may probably assist put you over the minimal threshold restrict is the premiums you could have paid to a personal health-services plan (resembling medical or dental plan), assuming the fee wasn’t absolutely paid for by your employer.

For those who’re an worker, make sure you verify your 2023 T4 slip, particularly field 85, for the quantity of premiums you might be able to declare as a medical expense for 2023.

Free tax assist

For those who or a member of the family has a easy tax state of affairs and a modest earnings, you could be eligible for assist in submitting your tax return from a volunteer at a free tax clinic. Final yr, free tax clinics helped greater than 758,000 Canadians obtain over $2 billion in profit, credit score and refund funds.

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These free tax clinics are hosted by native non-profits, charities and group teams throughout the nation in collaboration with the CRA by its Neighborhood Volunteer Revenue Tax Program. Assist is offered in individual, by video convention or telephone, and thru varied drop-off clinics, most of that are solely open between March and April, although some are open year-round.

To search out out whether or not you qualify and to find a clinic close to you, try the CRA’s online directory. New clinics are sometimes added, so make sure you verify again recurrently should you don’t instantly discover one which meets your wants.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Personal Wealth in Toronto. Jamie.Golombek@cibc.com.

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